There have been some changes announced (and put into effect) to ‘contracting out’ pensions which effect Global QROPS Ltd’s clients and, possibly, their decision to transfer these benefits to QROPS (Qualifying Recognized Overseas Pension Schemes). Many people are members of employer’s or personal schemes, that are contracted out, and therefore need to know more about the changes.
What are the major changes?
With the introduction of the upper accrual point from 6th April 2009, an individual’s entitlement to state second pension (S2P) is now based on their earnings between the lower earnings limit (£4,940 per annum 2009/10) and the upper accrual point, (£40,040 per annum – frozen from 2008/09) rather than on earnings up to the upper earnings limit.(£43,875 per annum 2009/10)
A side effect of this alteration is that, from 6th April 2009, earnings between the upper accrual point and the higher upper earnings limit have been subject to the full contracted in rate of national insurance contributions (NIC’s) although they do not qualify for any additional state pension benefit in respect of that payment. As a result, those contracted out, through employer or stakeholder/personal pension schemes, are only receiving rebates calculated up to the upper accrual point.
The second major change is the Government announcement, in the Pensions Act 2007, that all money purchase contracting out, for both employer defined contribution (DC) schemes and stakeholder/personal pension schemes, is to be abolished. This is expected to come into effect from 6th April 2012.
Global QROPS Ltd will keep all of their QROPS clients informed of any further developments.